The U.S. Cities Where It’s Easiest To Save Money [2024]

What are some factors that might be influencing more expensive versus less expensive metropolitan areas?

Some of the factors that help determine whether or not a city is more expensive or less include:

• Entrepreneurship: Cities in which it is relatively easier to start a business are likely to be less expensive than those that have high barriers to start-ups. Barriers such as occupational licensing, zoning requirements, government granted monopolies (such as taxicab medallions), and excessive start-up fees, are going to have proportionally fewer available suppliers of goods & services, which will tend to push prices up.
• Housing/Zoning regulations: Cities that make it difficult to build new housing, especially affordable housing or multi-unit housing, are going to be more expensive to live in than those where it is easier to build such housing. And as most housing regulations are driven by local governments, especially municipalities, this is primarily an issue on which local governments must be the catalysts for improvement.
• Crime: Cities that have higher rates of crime are going to be more expensive than cities with lower rates, as crime will drive up the costs of conducting business and will act as a deterrent to new business start-ups or relocations.
• Access to services/amenities: Easy access to healthcare, financial, and other services along with access to grocery and household goods, automobile services, and various forms of entertainment also will have an impact on the cost of living. This can impact rural communities especially, but not exclusively.

Which cities first come to mind first when you think of a gradual progression towards inflated home prices and an exceptionally high cost of living?

Obviously, cities such as San Francisco, New York, and Washington, D.C., come to mind immediately when one looks at very high housing costs. However, cities in the Midwest and Southwest, such as Austin, Texas, or Chicago, Illinois, are also seeing rapid increases in housing costs. The increasing cost of home prices in many of the larger cities in the U.S. is outpacing inflation. As I mentioned above, zoning and other housing regulations are major contributors to these rising costs.

What's the potential tipping point for certain changes to take place in a state's economy? (e.g., more employers giving a stipend for public transit, minimum wage increases, etc.)

There is no "silver bullet" when it comes to improving a state's economy. Important elements that will positively affect a state's economy include the items mentioned above (ease of entrepreneurship, zoning and other housing regulations, crime, and access to important services and amenities). In addition, human capital — having people with the necessary knowledge and skills to fill available jobs — is central to improving a state (or city's) economy. Key to that is having a strong education system (both K-12 and higher education). Also important is a general welcoming attitude towards those who are likely to start businesses, create innovations, and improve communities. Increasingly, those communities or states that express hostility to those who are different from them will see their economies lag behind more welcoming communities and states.

What are some factors that might be influencing more expensive versus less expensive metropolitan areas?

Cities of all kinds strive to attract young professionals who have certain expectations: good jobs along with lifestyle qualities like walkability, bike paths, green spaces and, of course, affordable housing. Cities depend on positive streams of income — are downtowns recovering, are entrepreneurs encouraged and supported, are tourists coming back, are major employers coming, staying, or leaving?

Which cities first come to mind first when you think of a gradual progression towards inflated home prices and an exceptionally high cost of living?

Some cities are also facing challenges like aging infrastructure — unsexy investments needed in older roads, bridges, water, electricity, etc. Some are struggling with new levels of crime or immigration. These direct and indirect costs get passed on to residents and businesses.

Cities vary widely over time with costs of living, which depend a lot on the cost of housing. Southern Florida, parts of North Carolina, and parts of Ohio have seen big housing cost increases recently, but it could be somewhere else next year. And spikes in construction costs and mortgage interest rates hurt every city.

What's the potential tipping point for certain changes to take place in a state's economy? (e.g., more employers giving a stipend for public transit, minimum wage increases, etc.)

The ease or difficulty of saving money depends on these big things like income and housing costs. But they also depend on how people spend their free time. It's easier to save money in a place with a culture of hiking, free outdoor concerts, and great transit than in one of expensive entertainment, restaurants, and transportation.

What are some factors that might be influencing more expensive versus less expensive metropolitan areas?

The big four are food, shelter, transportation, and employment. The question of affordability revolves around earning enough money in your job(s) to pay for food, shelter and transportation. Those cities where average employee earnings are higher allow for higher rents and prices at the gas pump and grocery store. Additionally, certain metropolitan areas have inherent advantages that allow them to differentiate themselves from other large population areas.

Which cities first come to mind first when you think of a gradual progression towards inflated home prices and an exceptionally high cost of living?

Since I live in Portland, Oregon, we are bookended by two large metropolitan areas where there is above-average earning potential and attractive natural landscapes: Seattle and San Francisco.

What's the potential tipping point for certain changes to take place in a state's economy? (e.g., more employers giving a stipend for public transit, minimum wage increases, etc.)

Growth is going to follow employment opportunities that allow people to earn enough money to afford living in a specific metropolitan area; affordable housing and transportation are significant factors people weigh in deciding where to live.

What are some factors that might be influencing more expensive versus less expensive metropolitan areas?

My colleague, Alex Schwartz, and I just completed a study related to this topic. It was just published in “Housing Policy Debate.” The question we sought to answer is: Where is the shortage of housing? It is widely held that the nation is experiencing a housing shortage, and that this shortage is a causal factor in the housing affordability problems confronted by so many. We do not find that many markets in the nation have a shortage of housing. The growth in the number of housing units has outpaced the growth in the number of households in all but a few metropolitan areas. Perhaps surprising some people, none of the markets with surpluses are large, e.g., Yuma, AZ, or Midland, TX.

If there are few, if any shortages, why is affordability such a problem? In nearly all markets, there is a significant mismatch between housing prices and household incomes. Enough units exist in nearly all markets. Unfortunately, these units are priced too high for large parts of the population, especially the poor. Virtually every metropolitan market in the U.S. has a severe shortage of units affordable to households with incomes below 30% of Area Median Income, a standard measure to identify [low-income households]. If not shortages, what drives high prices? The drivers are both on the supply side and the demand side. On the supply side, the costs of producing units continues to climb, but perhaps more importantly, many communities take overt steps to choke off the development of additional housing units even when strong demand would support more development. This serves the financial interests of existing property owners as the strong demand coupled with constrained supply expansion causes value to be bid higher, enhancing the net worth of the existing property owners. On the demand side, in markets where the incomes of households are higher, this higher ability to pay for housing bids up housing prices.

High prices are driven by various combinations of these forces. Some areas are notorious for constraining supply growth; coastal California is the textbook example. Other areas have very strong job growth and high wage levels which attract workers and stimulate demand for more housing. Where job growth and wages are high and the supply is constrained, the result is very high home prices, such as in coastal California. Where job growth and wages are high, but the housing stock is allowed to expand, housing prices will rise but at lower rates. The Research Triangle in North Carolina is an example of such a market.

Wage levels and job growth are strong indicators of a potential for high housing prices, but there is more. Some markets just have unique locations. Boston is an educational center. Washington D.C. is a governmental center. New York City is a cultural center. Los Angeles is an entertainment industry center. These star markets will command high housing prices because of unique locational attributes. People who want close proximity to these unique locations will pay a premium to live there.

Which cities first come to mind first when you think of a gradual progression towards inflated home prices and an exceptionally high cost of living?

There are no surprises here; the markets with the highest wages and the strongest job growth are also the markets with the highest housing prices. However, those markets with the greatest propensity of constraints supply growth in the face of strong job and wage growth are the most vulnerable to the temptation to cause housing prices to rise. Sometimes this resistance to allowing sufficient stock expansion comes with a general “anti-development” attitude. Coastal California is the extreme. Austin, Texas is less extreme but still resistant to development at a scale that would dampen [property] price levels. The research triangle is very accepting of development, and thus, enjoys housing price growth that is much more in line with income growth.

High job growth with high wages and regulatory constraints on development are the most common ingredients for inflated home prices, but not the only ones. Honolulu is an example of a tourist destination economy. The goal is to capture as many tourist dollars as possible. Miami seems to be particularly suited to capture investment dollars from Latin America.

What's the potential tipping point for certain changes to take place in a state's economy? (e.g., more employers giving a stipend for public transit, minimum wage increases, etc.)

Housing analysts like me are particularly bad at predicting tipping points. I remember discussion of the growth of California home prices in the late 1970s and into the 1980s. The discussion questioned if the price spiral could not go on forever. All agreed that the spiral could not inflate forever, but no one then or now was able to predict when a tipping point would bring the spiral to a halt. The recession of the 1990s lasted longer in California than elsewhere, and housing prices may have contributed to the recession’s persistence in California. With the recession, housing prices in California stalled longer than the rest of the nation but resumed with a vengeance when the recession finally stopped. Now, decades later, the spiral has not collapsed in California, but some signs are interesting. The out-migration of native Californians to other states is now tangible. People are realizing that their housing dollar can go so much further elsewhere. It has become a bit of a joke line, but “conservatives are leaving for Idaho and liberals are leaving for Colorado.” The California lifestyle is worth so much, but people are beginning to find that the price is too high and the lifestyle elsewhere is pretty good. San Francisco, once vaunted as the most desirable city in the nation, is now confronting losses of workers and losses of firms downtown. It is not clear that California has finally reached a tipping point. What is clear is that no one predicted the 2020s as the point at which the tide would turn.

Can policy create a tipping point? I hope so. We policy analysts are all watching the California minimum wage hike to see its impact on housing affordability. A $20 minimum wage means that any worker can earn at least a $40,000 annual income. There is no magic threshold at which affordability problems go away, but when a household earns $40,000, housing affordability problems begin to recede. The concern is that rents may rise further as the increase in wages hits the market. The market will adjust, and the hope is that it finds a new normal with minimum wage workers able to afford decent housing with a reasonable burden upon income.

What are some factors that might be influencing more expensive versus less expensive metropolitan areas?

Rent is number one. That is because it is embedded in the cost of virtually every brick and mortar service provided. This is because all of the businesses have to pay it, and many of their employees living in or near these areas will have to pay higher rents. Moreover, the more popular the area, the more people that want to live in the city, driving up rents further.

Second, third, and fourth, are state and local taxes, crime, and energy. Not necessarily in that order. Energy is unique to California, and is more of a self-inflicted wound, where electric energy prices have been driven through the roof by politicians and conservation groups trying to force everything to be generated through solar and wind. Crime is a more opaque cost, because you pay it only when you are subject to it, and it is a self-inflicted wound driven by lax criminal statutes/lax enforcement. And taxes will eventually drive the high earner tax-payers and businesses from the state. Those are driven by the egregious state spending. A wound, again, that is self-inflicted.

Which cities first come to mind first when you think of a gradual progression towards inflated home prices and an exceptionally high cost of living?

San Francisco, New York City, Seattle, Los Angeles — California in general. However, certain states or cities that were considered low cost in the past have become dramatically more costly to live in, e.g., much of Florida, Boise, Reno, Salt Lake City, for example. All due to the increased cost of real estate and rent from people (often Californians) flocking to those areas.

What's the potential tipping point for certain changes to take place in a state's economy? (e.g., more employers giving a stipend for public transit, minimum wage increases, etc.)

I think many of these reflect social values and policies of the state and local governments. However, as metropolitan areas become increasingly liberal because of the influx of a young population attempting to escape the high-cost areas, the values are likely to be more liberal, resulting ultimately in programs such as these. And they don’t come for free, they must be paid for, ultimately by the local taxpayers, thus reducing the affordability that was originally sought. The question is, can we afford it? Watch California, with a state income tax of 13% and proposals for a wealth tax, it is driving many high-net worth individuals and businesses/corporations to other states. That may be the ultimate tipping point, when the state can no-longer pay its bills and pension obligations because all of the taxpayers have left.